Fed tapering, Emerging Markets, Banxico

Thanks to Brent Donnelly from Nomura for this chart showing USDMXN vs 10-year US Treasuries since “tapering” became a new market watchword:

So what? Here’s so what: For anyone who ever thought Videgaray, Carstens or whoever else had any sway, when push comes to shove, dollar-peso moves almost in lockstep with Fed expectations. Put another way, whenever Bernanke & Co. decide easy money is over and raise interest rates, expect the peso to go back above 13.0+ and stay there (possibly even 14). And if Carstens or whoever replaces him is smart, they’ll keep their hands off. Draw your own conclusions about what that means for Mexican inflation, TIIE, etc.